Surface and mineral rights under discussion

As more and more gas wells and their accompanying development dot the landscape in Carbon County, they also are being drilled more frequently on private surface rights land. This means that gas companies and private owners are having to negotiate more leases and that means disputes between the two are arising more often. A public seminar at CEU next week will explain some of the nuances of gas well leasing.

Almost everyone has heard the stories of someone who owns property and one day an oil exploration company finds petroleum on this property. Suddenly they are rich beyond their wildest dreams, with so much money coming in off each barrel that they don't know what to do with it.

This Beverly Hillbillies scenario may have taken place at one time in the early part of the 20th century, albeit infrequently, but today it probably never happens at all. That is largely because in many states land law has become big business and now the land a person owns and what is beneath it is often two different things.

First of all it is important to understand some terms used in describing the operation of land law.

First of all is the term surface rights. This means a person who owns the land has the rights to the basic physical elements of realty. They own what is on top of the land. This right many also be referred to as the surface estate.

Second is mineral rights. Minerals, as the word is used in the discussion of mineral rights, is defined as to include some substances of organic origin such as oil, gas and lignite as well as substances of inorganic origin such as sulfur, bentonite or potash. The mineral rights to a piece of property is defined as the owner ship of the mineral resources which underlie a tract of land. With that right of mineral ownership is the right to explore for, develop and produce the mineral resource. Since minerals generally are located below ground level, mineral rights are also referred to as subsurface rights at times. Another term used is the mineral estate.

Whether one owns mineral rights along with property rights is determined by the original deed the person received on the property. For instance in some states, mineral rights are often extended with any property purchased, while in others, it is almost always separate unless specified. In Utah mineral rights must be specified.

Most people who buy property in Utah never own the mineral rights to that property. If for instance, someone buys a house in a subdivision, the original property the subdivision is placed upon usually has the mineral rights severed from the surface rights before the sale, if the mineral rights were even attached when the subdivision was created.

Larger pieces of property, two to 10 acres may or may not have mineral rights attached. Larger pieces of land are in the same boat. Mineral reservations are recorded with the county register of deeds and are included in any abstract of title to the land (Continued from page 1A)

Utah is one of only 14 states that allows mineral rights to be severed from the surface rights. In many places in Utah the state or federal government own the mineral rights under large sections of private land, which creates the problem that many landowners in the Carbon County area have been concerned about. That means the owner has the surface rights, but the mineral rights have been severed from their property and the government or it's lessees have the right to come in and extract any resource. That puts people at odds with the government and, more often the lessees.

Severance of minerals by mineral reservation has been widely practice by federal and state governments, land-grand railroads, lending institutions, as well as by individuals.

In the Eastern Utah area, coal has traditionally been the resource extracted from under the ground, but surface disturbance has usually been confined to property bought, leased or claimed from a government entity. The mines may go right under private property, but the surface disturbance has not generally bothered surface rights owners.

But with the advent of large scale gas operations in the last decade, surface and mineral rights have become much more important, because it takes much more wide spread surface activity by a company that wants to remove the resource it is after than mining has.

In the first few years of development in the county, this problem did not really have much impact on many landowners, because much of the land the companies were exploring and developing was public. But as the gas fields have grown, the land where these wells on public property need to be drilled is disappearing and in the last five years gas companies have been moving increasingly toward private land.

For surface rights landowners who have not had the mineral rights severed from their land this move has been somewhat profitable. For many of those that own land over mineral rights that don't belong to them it has been a perplexing source of frustration and anger.

Gas exploration and production companies are required by the state to negotiate with surface rights owners for the right to come onto private property and use the land to extract the resource. This usually means clearing a pad for the drilling rig (about two acres in most cases), building roads to reach it, including a slush pond for water and other items necessary for the drilling. If gas is discovered and drawn then usually a pipeline will need to be dug and all the equipment to extract and keep the resource flowing will need to be constructed.

But what if an owner does not want his land disturbed in such a manner? Or what if the compensation the company is offering does not seem enough to the surface rights owner for all the trouble and disturbance?

That is where the frustration comes in. In many cases gas companies offer a few hundred dollars as a one time fee for coming on the property people with surface rights own to explore and produce gas from wells that could be on the site for many years.

People with mineral rights usually negotiate not only to get the one time fee, but also some type of royalty or residual each year on the anniversary date of the lease as long as the well is producing.

In the past few months some of the disconcerted citizens dealing with this situation have come to the Carbon County Commission hoping to change or influence this situation, but commissioners have told them repeatedly that the only thing they can do is regulate how the wells and exploration is done by the use of conditional use permits. These permits, that the gas companies must apply for through a process of review by the planning and zoning commission and final approval by the county commission, regulate a number of things like noise, reclamation of the site after the site is abandoned, dust control, dust control and others. In fact at this point there are 16 items that are reviewed by planning and zoning and the commission and they also can add others. The leasing process and the perceived fairness or unfairness of that is not part of the counties power to control.

The power companies have to extract minerals over the objection of the surface rights owner is called the "dominant estate." This means the mineral owners right to use the surface generally has superiority and priority over any purposes the surface owner has. But generally this right must be reasonably exercised with due regards to the surface owners rights. In other words the mineral rights owner should not use more land than is reasonably necessary and should exercise due care when operating on the property.

The complex and convoluted laws that deal with this issue cannot be explained in a simple newspaper article. That's why it is important for landowners who are or may be involved in gas well leasing to attend a free seminar on the subject at the College Center on the College of Eastern Utah campus on Aug.22.

Presentations will include an overview of Utah regulations that affect private landowners, requirements for royalty payments and payment information, the how's and why's of leasing, surface vs. mineral rights, and the difference between a royalty owner and a working interest owner. The seminar is being presented by the Utah Division of Oil, Gas and Mining in conjunction with the Interstate Oil and Gas Compact Commission.

The seminar program will include presentations by DOGM along with guest speakers Marvin Rogers and Tod Bryant.

Rogers is an assistant attorney general assigned to the staff of the Alabama Oil and Gas Board. He combines his knowledge of law and mineral rights into an interesting presentation of this subject.

Bryant is the communications manager for the Interstate Oil and Gas Compact Commission (IOGCC). In addition to overseeing all aspects of the multi-state agency's communications program, Bryant is also supervisor of the IOGCC's training program. Bryant previously served as communications director of the Oklahoma Energy Resources Board. Prior to that, he spent many years in the journalism and public relations fields.